Nasdaq receives SEC approval for AI-based trade orders
Nasdaq announced that the United States Securities and Exchange Commission (SEC) has approved its request to operate the first exchange AI-driven order type on Sep. 8.
Called the dynamic midpoint extended life order (M-ELO), the new system expands on the M-ELO automated order type by making it “dynamic,” meaning it will use artificial intelligence to update and, essentially, recalibrate itself in real time.
⚡ Bringing AI to the capital markets: Today, @Nasdaq announced it has received @SECGov approval to launch Dynamic Midpoint Extended Life Order (M-ELO), the first artificial intelligence (AI) powered order type.
Learn more about this next step we are taking to modernize markets,… pic.twitter.com/vFkLdjM3Br
Order types are a set of software instructions that execute specific trade pairs at exact market pricing thresholds. This form of automation has been around for a while but the new AI-driven order type is the first of its kind to use real-time reinforcement learning AI to execute orders.
This should have the follow-on effect of substantially speeding up orders placed with the system. In a blog post accompanying the approval announcement, Nasdaq stated that dyamic M-ELO had demonstrated a "20.3% increase in fill rates and an 11.4% reduction in mark-outs" during their research and testing.
According to a data sheet published by Nasdaq:
By adjusting the holding periods for orders in real-time, as opposed to the traditional system that simply applies static timeouts to orders, fill-rates should increase without a significant increase in market impact.
Related: Bybit debuts AI-powered ‘TradeGPT’ for market analysis and data-driven Q&A
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